Month: May 2016

In this post credit crunch world of sub terrain low interest and annuity rates (so low even a limbo dancer would smart), the growth of buy to let since 2009 has been phenomenal. So much so, there has been an evolution in purchase of property in the UK from that of just buying the roof over one’s head to that of a buy to let investment where it is seen as a standalone financial asset to fund current and future (ie pensions) investment. So recently, a few days before the release of latest Land Registry data of property transactions, quite a few market commenters were anticipating a huge increase in the number of properties sold in January as the 1st of April 2016 stamp duty deadline got closer.

Looking at the most recent set of data from The Land Registry, it seems there has been a rise in the number of completed property sales in the Plymouth City Council area. Year on year, completed property sales in January (the latest set of data released) rose by 14.45% to 285 compared with 249 in January 2015. Nationally though the number of completed house sales fell by 5% in January 2016 compared with January 2015. So, some might say this bucks the trend that there was a rush by landlords to buy ‘buy to let’ property ahead of the 1st April 2016 deadline …

But, looking closer to home though, in the PL5 postcode in January 2016, 31 properties changed hands, whilst 40 properties did so in January 2015. It’s even more interesting when you look at the average price paid, in January 2016, it was £164,722 yet in January 2015, the average price paid was £125,618.

Is the buy to let dream over for Plymouth landlords?

.. but as ever my Plymouth Property News Blog readers will tell you, the devil is in the detail. The 3% stamp duty surcharge for buy to let landlords was announced in the Autumn Statement on the 25th November 2015. Anyone who has bought a property knows from their offer being accepted to receiving the keys and monies paid is a long drawn out affair, taking on average 8 to 12 weeks, as the Land Registry only get notified upon completion of the sale. We also need to factor in that Solicitors seem to have the last two weeks of December off anyway.

So if there was a rush in the last few days of November/early December in the Plymouth property market, we would only see the results of that in the February figures (released in June) and more probably March’s (released in July).

So why all the doom and gloom? Simple .. bad news sells newspapers and gets the headlines. Let’s be honest, the headline to this article is designed to be eye catching. However, when we look at both the bigger and smaller picture; nationally, property values dropped (month on month) by 0.5%; in the South West region they dropped 0.9%, whilst in Plymouth they rose by 0.2%. The year on year figures tell a completely different story to that.

It just goes to show you should look deeper into something before making a judgment! For more thought provoking commentary on the Plymouth property market – please visit the Plymouth Property News Blog – www.plymouthpropertynews.wordpress.com

There’s a whole legion of wannabe Plymouth first-time buyers keen to get on the property ladder and they now have a 3% price advantage over the previously quicker responding army of Plymouth landlords with cash at the ready. Since the start of April, buy to let landlords have had to pay an additional 3% stamp duty so whilst demand from some Plymouth buy to let landlords has dropped away, in the interim, it offers Plymouth first time buyers (FTB’s) a chance to fill the vacuum with less competition from cash rich landlords (over two thirds of BTL properties were purchased without a mortgage in the last 7 years) who could bid more and complete quicker.

Looking at the average value of a terraced house in Plymouth currently standing at £162,700, that means if our Plymouth FTB went up against a Plymouth landlord, the landlord would have to pay an additional £4,881 in stamp duty. Early antidotal evidence from fellow property professionals in the city is suggesting landlords are reducing their offers slightly on Plymouth properties to reflect the extra stamp duty.

Whilst on the face of it, it appears landlords are being punished by No.11 Downing Street, I actually believe this increase in stamp duty for landlords is a good thing for the Plymouth property market as a whole.

Since 2011/12, the Plymouth property market has performed very well indeed. Over the last 12 months, £741,439,872 has been spent buying 3,904 Plymouth properties. Figures from the Land Registry have just been released and month on month in our council area, property values are 0.2% higher and 0.2% higher year on year. These figures are nowhere near the heady days of 2004 (November to be exact), when Plymouth property prices rose by 23.3% in 12 months.

So as property values in Plymouth (and the UK as whole) start to stabilise and come back to some kind of balance, I am beginning to see savvy landlords view the Plymouth property market in a different light. Even with the Spring rush, gone are the days where you could make limitless money on anything that had a door, a few windows and roof. This stamp duty change has made more and more landlords, after reading the Plymouth Property Market Blog plymouthpropertynews.wordpress.com take advice on what or not to buy and what to pay, meaning Plymouth landlords are being more calculated with their Plymouth BTL purchases. I am also seeing a variance between relatively brisk current price momentum and softer expectations in terms of property value growth in Plymouth, this in part reflects amplified uncertainty about the short term economic outlook (eg Brexit, Issues in the Far East etc).

Now I know a lot of Plymouth landlords brought forward their BTL purchases to beat the stamp duty deadline. However, it is probable that hunger from Plymouth investors will return for the right Plymouth property later in the year, especially if it’s at the right price and offers a decent yield. However, in the meantime, Plymouth FTB’s could and should, in the short term, make hay whilst the sun shines, plug the gap and grab a bargain!

My parents bought their first house in the 1970’s, they were in their early 20’s. Interestingly, looking at some research by the Post Office from a few years ago, in the 1960’s the average age people bought their first house was 23. By the early 1970s, it had reached 27, rising to 28 in the early 1980’s.

This year alone, 3,923 people in Plymouth will turn 28 and 4,475 in 2017 .. and dare I say 5,498 in 2018 .. year in year out the conveyor belt carries on .. where are the Plymouth youngsters going to live?

Ask a Plymouth ‘twenty something’ and they will say they do not expect to buy until they are in their mid thirties – seven years later than the 1980’s. Some people even say they will never be able to buy a property and the newspapers have labelled them ‘Generation Rent’ as they are people born in the 1980s who have no hope of getting on the property ladder. One of the major problems facing young Plymouth people is the large deposit needed to get a mortgage .. or is it?

The average price paid for an apartment in Plymouth over the last 12 months has been £132,200 meaning our first time buyer would need to save £6,610 as a deposit (as 95% mortgages have been available to first time buyers since 2010) plus a couple of thousand for solicitors and survey costs. A lot of money, but people don’t think anything today of spending a couple of thousand pounds to go on holiday; the latest iPhone upgrade or the latest 4K HD television. That amount could soon be saved if these ‘luxuries’ were withheld over a couple of years but attitudes have changed.

Official figures, from the Office for National Statistics, show the average male in Plymouth with a full-time job earns £507.30 per week whilst the average female salary is £455.10 a week, meaning, even if one of them worked part time, they would still comfortably be able to get a mortgage for an apartment.

I was reading a report/survey commissioned by Paragon Mortgages from the autumn of last year. The thing that struck me was that when tenants were asked about their long term housing plans, some 35% of participating tenants intend to remain within the rental sector and 24% intended to buy a house in the future, with the proportion of respondents citing the “unaffordability” of housing as the reason for renting privately increasing from 69% to 74%.

However, time and time again, in the starter home category of property (ie apartments), nine times out of ten the mortgage payments to buy a Plymouth property are cheaper than having to rent in Plymouth. It is the tenant’s perception that they believe they can’t buy, so choose not to. Renting is now a choice. Tenants can upgrade to bigger and better properties and move up the property ladder quicker than their parents or grand parents (albeit they don’t own the property). Over the last decade, culturally in the UK, there has been a change in the attitude to renting so, unless that attitude changes, I expect that the private rental sector in Plymouth (and the UK as a whole) is likely to remain a popular choice for the next twenty plus years. With demand for Plymouth rental property unlikely to slow and newly formed households continuing to choose the rental market instead of purchasing a property. I also forecast that renting will continue to offer good value for money for tenants and recommend landlords pursue professional advice and adopt a realistic approach to rental increases to ensure that they are in line with inflation and any void periods are curtailed.

April Fools Day was no joke for some landlords, as they rushed their buy to let property purchases throughout late March to beat the extra 3% stamp duty George Osborne imposed on buy to let properties after the 31st March 2016. Because some investors brought forward their 2016 property purchases to save the extra tax, speaking to fellow property professionals in Plymouth, all of us have noticed, since the clocks went forward, demand to buy in April and May from these landlords has eased.

Then we have the Brexit issue, which is also having a tempering effect on the Plymouth property market – although if you recall I wrote about this a few weeks ago, and whilst an exit will have an effect – it won’t be the end of the world scenario some commentators are suggesting. In another article I wrote previously, I spoke of the growth rate of Plymouth property values, and whilst the rate of growth is slowing, Plymouth property values are still 1.1% higher year on year, albeit the growth rate month on month has started to moderate when compared to the heady days of month on month rises of 2014 and 2015. Interestingly though, a very recent members survey of the Royal Institution of Chartered Surveyors states that only 17% of members believed property values would increase over the next Quarter compared to 44% at the end of 2015.

All this had led to increase in the number of properties for sale. For example in the PL3 postcode, which mainly comprises of Efford, Hartley, Laira, Mannamead, Milehouse, Peverell and Higher Compton, there were 220 properties for sale in the postcode in December (of which 33 came on to the market for the first time). In January, February and March, 241 properties came onto the market in the postcode district (or an average of 80 per month), meaning by end of the first Quarter, there were 273 properties available for homeowners and landlords alike to buy in PL3 (i.e. a rise of 24% more properties for sale). These figures are mirrored in neighbouring postcodes throughout the Plymouth area.

Nevertheless, I believe this easing of the Plymouth property market is a good thing, as investment landlords wont have to pay top dollar to secure a property because of the lower competition. On the face of it, this easing should be bad news for the 131,241 Plymouth homeowners, but nothing could be further from the truth. The majority of homeowners that move, move up market, (i.e. from a flat to terrace/town house, then a semi and then detached), so whilst last year you would have achieved a top dollar figure for your property, you would have had to have paid an even higher top dollar to secure the one you wanted to buy. The Swings and Roundabouts of the Plymouth Property Market!

However, all the signals suggest that whatever the aftermath of the approaching EU referendum, in the long term, the disparity between demand for Plymouth property and the supply (i.e. the number of actual properties) will still exercise a sturdy and definitive influence on the Plymouth property market. It would surprise me that if by 2021, whichever way we vote in late June, assuming we don’t have another credit crunch or issues like a major world conflict, property prices will be between 20% to 22% higher than they are today.